Employee reactions to joining a spinoff can range from uncertainty and alarm to excitement and anticipation. When communication about the spinoff has been limited and the company is rife with rumors regarding next steps, it is understandable that some people may feel existential threats to their livelihood as well as to long-time friendships and networks, the value of the expertise they forged in the prior company, and their personal career path going forward. On the other hand, a new organization that is well positioned in a strategic market could mean the chance for increased innovation, rapid business growth, promotion opportunities, and merit-based rewards with greater potential upside.
It is important to consider both how to mitigate the downside risks of a spinoff that is planned or in process, and also how to leverage real opportunities. Three topics tend to surface in spinoff situations:
People: Employee engagement tends to be quite personal, and is most closely linked to one’s immediate set of relationships. “I have a best friend at work” and “My supervisor, or someone at work, seems to care about me as a person” are two of the twelve Gallup survey items used to measure engagement and to predict performance. A spinoff that ruptures such established ties through headcount reduction or restructuring needs to quickly start recreating them, or else risk large-scale employee departures.
Pride: When a company with a long history and a well-known brand spins off a smaller entity, employees in the new organization may struggle with reframing their personal identities. People often feel a sense of pride and prestige in belonging to a big-name company, and it can be disorienting to suddenly become part of a firm with a shiny new brand invented by consultants and lawyers that employees themselves may even have trouble spelling or pronouncing at first. This issue tends to be particularly acute in more status-oriented cultures around the world, where one’s personal identity and social standing is often linked to a particular brand name. Here are comments we’ve heard from spinoff employees struggling with this type of change:
Building or reestablishing a recognizable brand as soon as possible is vital not only for customer relations but also for employee morale.
Benefits: Highly profitable companies may offer not only generous salaries but also benefits such as exercise facilities, event tickets, vehicles, on-site meals, access to shared services, and so on. Although these are far less important from a big picture perspective than the threat of losing one’s job, the new company needs to ensure that its benefit package does not feel like a big step backward, or find ways to offer different kinds of opportunities that will offset the old privileges.
Deliberately or not, spinoffs set the tone for the new organization through the choices they make early on. Employees typically look closely at signals such as the quality of the new executive team (Is it an A-Team or a B-Team?), the resources that will be available for product development, marketing, or manufacturing, and whether key R&D personnel have come along as well. There is also a “story” that quickly develops in response to the question of “Why did we do this?” Cheerful executive pronouncements will be undermined if the narrative employees actually hear from their colleagues is, “The parent company is just getting rid of our less profitable part of the business,” or “They needed a place to park their unfunded liabilities.” In contrast, a storyline that says, “It makes sense to position this part of our business independently, and we’re well-positioned to grow,” will likely have a far more positive impact. Spinoff leaders need to provide messaging that feels authentic to employees or risk backlash.
The top priorities for a new spinoff are to refocus the business and align employees with a fresh sense of purpose. Vision, mission, and priority objectives are all components of this so long as they are clear and consistent, without a lot of corporate-speak. Spinoff employees want to know, “Does this new enterprise make sense?” “Can we win in the marketplace?” “Are there ‘synergies’ coming that will mean job cuts?” “Should I stay or should I leave?”
Spinoff leaders often need to make critical choices about how to handle the heritage of their legacy organization, which can be quite powerful and hard to let go. Some may want to replicate what they have known, and don’t see any urgency to change. Wholesale changes could also threaten employees’ sense of self-worth if they mean adopting difficult new practices. Others who view the spinoff as an opportunity to grow and to form a new identity are likely to be disappointed if they feel like they’re still working in the same old company. Legacy policies and procedures—e.g., related to budgeting, resource allocation, or brand image—can also become obstacles for the new enterprise as it seeks to adapt to different market conditions.
Spinoffs and even new business lines within established organizations must usually balance forgetting, borrowing, and learning. This means identifying legacy organizational practices to leave behind, making careful strategic choices about what it is easier to borrow than to reinvent (e.g., specialized technologies, customer contacts, or capital investments), and targeting some areas as new learning opportunities where they can establish their own unique set of knowledge and capabilities.
Several areas that merit special attention for most spinoffs are accelerated team building, constantly applying a global lens, and building an environment of deliberate inclusivity.
Accelerated Team Building: Many of the trend lines for the new enterprise will take shape in a team context, whether this means making progress towards updated objectives, engaging employees, or shaping the emerging storyline about the spinoff itself. For the new enterprise to coalesce and begin to generate forward momentum, teams across the company will need to gain traction quickly. These may be executive teams, business unit teams, project teams, functional teams, or regional teams—what they usually have in common is that their membership has shifted from the previous organization, and their team charter must now serve different priorities. Yet they each need to perform at a high level and be aligned with each other.
In this unsettled environment, establishing or reestablishing personal relationships, building a deep sense of trust, clarifying roles and responsibilities, and realigning around updated goals and objectives are all crucial. Teams rife with uncertainty and suspicion quickly turn dysfunctional and become obstacles to organizational progress rather than serving their intended purpose. There are many good methods and resources for accelerated team building. One tool that we recommend for this purpose is the GlobeSmart® Profile. This work style assessment enables team members to consider topics such as: “What are the individual Profiles we have represented on our team? How can we value the background and experience of each team member? How can we work best together to gather information, solve problems, make decisions, and get things done?” Team members who join this discussion find that they soon know each other better and are better prepared to tap the unique capabilities of their colleagues.
Global Lens: As the spinoff unfolds, a variety of decisions must be made regarding branding, executive leadership, team composition, R&D priorities, product specifications, budget allocations, and so on. Choices that make perfect sense for one country or region may lead to major issues elsewhere. Branding, for example, involves terminology and aesthetics that may or may not translate well. Spinoff leaders who are understandably in a hurry to make progress will not be well-served if they make a series of rapid-fire decisions based on their own backgrounds, but neglect to gather views from their global colleagues.
Rather than, “We’ll make a decision now and then tweak it later for each region,” it is far more efficient and effective to say, “Let’s work globally from the start.” This requires doing the difficult work of seeking input from each region and ensuring that perspectives from major markets around the world are represented as decisions are made. Otherwise, six months or a year into the spinoff, leaders are likely to still be struggling with unexpected surprises, unhappy customers, and local employee resistance, leading to costly “do-overs”: “If you had asked us, we would have told you that this strategy was not going to work in our market.”
Deliberate Inclusivity: How can you make every spinoff employee feel like an insider? This is important to consider when responding to the question so many people have—“Why are we no longer part of the mother ship?”—and when determining ways to refocus employee energy. Messages such as “You belong here,” “We’re all in this together,” and “We have some really exciting opportunities together going forward,” will go a long way toward helping each person to become fully engaged, with significant consequences for both talent retention and dedication on the job.
Inclusion has global, domestic, and interpersonal aspects, and is an ongoing challenge for almost everyone. However, spinoffs seeking to make a fresh start are well-advised to revisit the behaviors most conducive to an environment where psychological safety, allyship, empathy, perspective-taking, and so on are part of the everyday workplace fabric. Extensive data gathered from Aperian’s Inclusive Behaviors InventorySM indicates that employees in all industries rate themselves lowest across the board on three specific behaviors.
For spinoffs seeking to build real inclusivity within their organizations, this is an excellent starting place. How can you ensure that each employee has a diverse set of relationships, provides feedback to others in an even-handed way, and learns what motivates people from different backgrounds? A plethora of skill-building resources and techniques is available to draw upon—the key is highlighting behaviors such as these early and often, with leaders visibly modeling them as well.
Training on how multicultural teams can build inclusive practices within hybrid work settings is a fine next step; it is vital for employees who are remote from headquarters to feel like they, too, are bonafide members of the new enterprise. A big-picture launch, drumbeat communication, one-on-one check-ins, positioning team members, using symbolic messages, identifying tag teams and window persons, and people exchange are among the techniques that in our experience have a positive impact on team members’ sense of belonging and their readiness to contribute as fully enfranchised participants.
Each spinoff faces its own distinctive set of challenges, and some are better positioned to succeed by their parent companies than others. However, nearly every “Newco” will benefit from these three recommendations: accelerated team building, constantly applying a global lens, and building an environment of deliberate inclusivity.
If you are in the midst of your own spinoff, we are here to help! Contact us to learn more about how Aperian learning solutions can support your spinoff.
